Section 8 Company

The Companies Act defines a Section 8 company as one whose objectives is to promote fields of arts, commerce, science, research, education, sports, charity, social welfare, religion, environment protection, or other similar objectives.

Section 8 companies do not aim to make profits. Their objectives are purely charitable in nature. They aim to further causes like science, culture, research, sports, religion, etc.

Advantages of Section 8 Company

People generally prefer to conduct charitable activities by forming Section 8 companies instead of regular NGOs and associations. This is because they have limited liability, so their personal assets will not be used in paying debts of the company. Here are some advantages that these companies enjoy:

• Members have limited liability
• No minimum capital requirements
• They get several tax exemptions.
• Stamp duties and high fees are not payable for registration.
• They have perpetual existence and separate legal status
• Exemptions from carrying out several procedural compliances.
• More credibility than compared to NGOs, societies, and trusts because they are recognized by the Central Government’s license.
• Section 8 companies can get tax exemption from income tax under section 80G and section 12A. If Company gets registered themselves under section 80G and section 12A

Key Requirements:

• Promoters: A minimum of two adults (above 18 years) are required as promoters.
• Digital Signature Certificate (DSC): All directors need a valid DSC for online filing.
• Director Identification Number (DIN): Each director must have a DIN obtained through the MCA portal.
• Memorandum of Association (MOA): This document outlines the company’s vision, mission, and social objectives.
• Articles of Association (AoA): This document defines the company’s internal governance rules and regulations.

Registration Process:

1. Obtain DSC and DIN: Apply for DSCs for the proposed directors and then use them to file for DINs.
2. Reserve Company Name: Choose a unique and appropriate name for your company and submit it for approval through the MCA portal.
3. Draft MOA and AoA: Prepare the MOA and AoA documents outlining your company’s purpose and internal structure.
4. Apply for License: File an online application for a Section 8 license using eForm INC-12 along with the MOA and AoA.
5. Incorporate the Company: Upon license approval, file SPICe+ form with the ROC for company incorporation. This form includes details about the directors, subscribers, and share capital.

Post-Registration Compliances:

• Open a Bank Account: Open a bank account in the company’s name for financial transactions.
• Maintain Books of Accounts: Properly maintain books of accounts as required by law.
• Conduct Board Meetings: Hold regular board meetings to discuss and document company activities.
• File Annual Reports and Returns: File annual reports and other necessary returns with the Registrar of Companies (ROC)

Additional Considerations:

• Registration Fees: Government fees and professional charges apply during the registration process.
• Tax Exemptions: Section 8 companies may be eligible for tax exemptions under Income Tax Act, 1961. However, specific conditions apply.
• Legal Consultation: Consulting a qualified legal professional is recommended to ensure compliance with all regulations.